How to know if your property has become a good investment

Let’s talk about the factors you must know to understand the valuation of your properties.

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4 min read

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

Opinions expressed by Entrepreneur contributors are their own.

Over time and depending on various factors, homes can increase or decrease in value. To know if your property has become a good investment, tells you everything you should review.

Factors that affect the price of a home

The capital gain is the main value that we must review to know the appreciation or depreciation of an area. This indicator is determined thanks to various factors, such as:

  • New developments in the area
  • Land use changes
  • Projects to improve infrastructure

Leonardo González – Real Estate analyst of the real estate portal – explains that a property has become a good investment, if the capital gain observed in the area where it is located is higher than the yield of other risk-free assets, such as cetes for example .

“By having an innovative urban environment, adequate public services, central or strategic location, and demand expectations, properties in an area can improve their value,” he says.

Likewise, it advises reviewing other key indicators and metrics, such as:

  • Risk-free asset rate of return
  • Inflation
  • Exchange rate (if the property is priced in dollars)
  • Capitalized yield in equivalent places
  • Price Forecasts

Keep your property to keep your investment

When you buy a house, you are not only acquiring a property to live in. You also have at your disposal an asset that in the long term can be converted into an investment. Therefore, to choose the best option you must take into account some points.

The first is to know if the property has commercial value. For example, the number of square meters corresponds to the average number of homes in the area. According to Fernando Soto-Hay, general director of Tu Hipoteca Fácil, apartments with two or three bedrooms are more profitable than those with one.

Likewise, it is essential that you always keep your property in the best condition. Regular reviews and timely repairs help preserve your investment and avoid hidden defects.

How the area influences your investment

Your house as an investment must offer the necessary habitability conditions over time. If the area where it is located has increased its capital gain in recent years, the best-preserved homes will have a better value than the deteriorated ones.

However, while infrastructure improvements are important to the livability of an area, they can also be a problem. Soto-Hay points out that some, such as the creation of road alternatives that impact aggressively, tend to depreciate the value of a home.

Infrastructure improvement projects could increase the value of a property. Especially those that improve the quality of life in the area, such as:

  • Sidewalk or street repair
  • Mobility alternatives (bicycle lanes and public transport routes)
  • Improvements in the flow of roads
  • Greater services

Key indicators and metrics are your main compass when choosing the home to buy. However, the help of a real estate consultant will be valuable in recognizing which property will become an investment. In addition, it will help you avoid real estate fraud and guarantee your acquisition.

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